Year End Tax Planning Window Presents Opportunity

Regardless of your tax situation, being mindful of the tax deadline and understanding tax credits and benefits with the support of an advisor can result in significant savings for many Canadians who may be paying out more than they should.

CANADA - While tax planning should be a year-round affair, the window for Canadians to take advantage of certain tax savings is fast approaching, particularly for small business owners in light of the recent tax change proposals, says Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Financial Planning & Advice.

In his new CIBC report, 2017 Year End Tax Tips, Mr. Golombek provides a comprehensive overview of some notable tax-planning opportunities that should be considered before the December 31 deadline:

New deadline for tax-loss selling;

Charitable donations for first-time donors;

Home renovation tax credits; and

Private corporation business owners.

For investors, tax-loss selling to offset capital gains realized on other investments is an important tax savings strategy. New for 2017, Canada has adopted a shorter settlement period for equity and long-term debt market trades.

This means that, rather than the previous three-business-day settlement period, trades are now settled in two business days. To ensure that your trade settles in 2017, your trade date must be no later than December 27, 2017.

Mr. Golombek adds that while it may be tempting to transfer an investment with an accrued loss to your Registered Retirement Savings Plan or Tax-Free Savings Account to realize the loss without actually disposing the investment, such a loss is specifically denied under current tax rules – and there are also substantial penalties for swapping an investment from a non-registered account to a registered account for cash or other consideration.

For private corporations, some of the recently proposed tax changes could impact income sprinkling and passive investment income earned within corporations. These changes could result in tax rates of more than 40% (depending on the province) when small business income is distributed as dividends to family members after 2017 and may be of particular concern for families that have implemented estate freezes.

Federal and provincial tax credits for charitable donations can result in combined tax savings of up to 50% of the value of your gift in 2017. But, as Mr. Golombek points out in his report, 2017 is the last year you can claim the federal First-Time Donor's Super Credit (FDSC) if neither you nor your spouse or common-law partner has claimed the donation tax credit from 2008 to 2016. The FDSC provides an additional 25% tax credit on total monetary donations of up to $1,000.

Many Canadians may not be aware of the tax credits available for home renovations related to accessibility for seniors and people with disabilities, he says. The non-refundable Home Accessibility Tax Credit is equal to 15% of up to $10,000 of expenses per year towards renovations that permit individuals to gain access to, or to be more mobile or functional within, their homes or reduce their risk of harm within their homes or from entering their homes.